The Maharashtra Electricity Regulatory Commission (MERC) has allowed Adani Electricity Mumbai-Distribution to buy 250 MW of renewable energy on a round-the-clock basis from grid-connected projects through competitive bidding.

The approval comprises a greenshoe option to procure an additional 250 MW. The overall procurement can be complemented with other non-renewable energy sources.

The Commission also allowed a ten-year tenure for the power purchase agreement (PPA) instead of 25 years but rejected the distribution licensee’s petition on deviation related to the escalation factor.

It clarified that the power procured from the projects would be counted toward the renewable purchase obligation (RPO) compliance of Adani Electricity.

Background

On July 7, 2020, Adani Electricity filed a petition before the Commission seeking approval to procure 1,000 MW of power from grid-connected renewable energy projects, complemented with power from coal-based thermal power projects on an RTC basis.

The Commission accorded in-principle approval to procure 500 MW in the first phase.

It had considered the continuation of the 500 MW power supply from Adani Dahanu Thermal Power Station and directed the distribution licensee to procure an additional 500 MW.

In the same order, an alternative option of considering the tender of 1,000 MW with a greenshoe option (500 MW + 500 MW) was also suggested by the Commission.

Further, the Commission, in its order dated March 30, 2020, directed Adani Electricity to approach it at least six months before the expiry of its arrangement with Adani Dahanu thermal power station for either extension of the arrangement or power purchase from an alternative source after exploring all available options of procurement.

Later, Adani Electricity filed a petition before the Commission to procure 1,000 MW (500 MW + additional 500 MW under greenshoe option) power from grid-connected renewable projects, complemented with power from coal-based thermal power projects in India on an RTC basis for ten years.

Regarding the Commission’s query on the possibility of power procurement through SECI Tenders, Adani Electricity submitted that, although SECI was in the process of issuing tenders, it may take considerable time to finalize the same.

Since it had to meet its consumers’ demand gradually from ~ 50 MW in FY23 to ~ 600 MW in FY27. Further, it was estimated that 18 to 24 months were required for a successful bidder to set up projects, and the tendering process needed to be initiated as early as possible.

Further, Adani Electricity added that procuring power through the SECI tender process would attract a trading margin of ₹0.07 (~$0.0008)/kWh, and the consumers would have to bear the impact of the trading margin for each unit purchased, which will amount to ₹3.07 (~$37.69 million) billion for ten years.

Commission’s analysis

The Commission directed Adani Electricity to strike a balance between future power requirements and currently issued bids for power procurement.

The Commission directed Adani Electricity to invite bids for 250 MW + 250 MW under the greenshoe option. This would be in addition to the 1,000 MW (500 MW + 500 MW under the greenshoe option) allowed in the order dated November 1, 2022.

The Commission allowed the deviation regarding ten-year PPA tenure but rejected the deviation sought regarding the escalation factor.

The Commission relied on its earlier order to allow the deviation.

Commission had earlier noted that a 25-year PPA would help the recovery of the project cost over a longer period and lower tariffs.

However, the distribution licensee had envisaged the supply of non-renewable power from existing plants, and such depreciated plants would have a lower tariff to offer.

Hence, the objective of the longer period PPA might not be defeated even if a comparatively lower term PPA was considered.

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